Talk to your lenders if you’re in dire financial straits
Despite serving as the state’s chief tax collector, Maryland Comptroller Peter Franchot likes to advocate for individuals paying less in taxes to state government. Whether touting sales tax holidays or cautioning lawmakers to spend less, he generally brags more about the speed at which his staff processes income tax refunds than their skills at collecting record sums. So it came as no surprise that when the COVID-19 outbreak struck these shores, he was soon busy extending the tax filing deadline to July15 for both individuals and businesses, which, for those who owed the state, offers a slightly better cash-flow situation. The federal government has taken a similar approach on the grounds that in these extraordinary times, the last thing government at any level should be doing is pushing families closer to the financial brink and compounding the nation’s economic woes.
But lately, Comptroller Franchot has been offering some additional advice that, while slightly out of his lane, deserves to be amplified. In a recent call to The Baltimore Sun, he asked that people be reminded that further help is available to those who need it.
The comptroller’s advice? If you can’t make your mortgage or car payment and the like, call the lender now — immediately — and discuss what options might be available to you.
As Mr. Franchot points out mortgage holders, bankers and the other organizations to whomyou owe money are just as aware of the economic downturn brought by the outbreak, and it’s in their interest to bridge the gap as well. That doesn’t mean forgiving debt. This is capitalism, after all. But there are tools in their toolboxes such as deferring payments or bridge loans that can mean the difference between bankruptcy or foreclosure or simply extending the terms of your mortgage a few months.
The comptroller’s fear (and it’s probably well grounded) is that a lot of Marylanders will resist this option. Perhaps they are unaware of what is possible. Big companies put pressure on their creditors all the time when events warrant. Individuals living paycheck to paycheck don’t think of themselves in quite those terms, which is perfectly understandable. “They may lack the self-confidence and aggressiveness of people who are successful and are used to doing this,” Mr. Franchot says. But here’s what financial advisers frequently warn people facing debt: The longer you wait to talk to those you owe money, the fewer options will be available to you.
The stakes are high. In Maryland alone, perhaps $6 billion in monthly payments by Mr. Franchot’s back-of-the-envelope calculations. That’s a lot of money. And here’s the best thing — it doesn’t hurt to pick up a telephone and ask. Landlords may be able to make allowances as well. Not all and not for longer periods, necessarily, but perhaps long enough for the economy to spring back, for people to get back to work, and for something closer to normal life to return.
This is not cure-all, of course. Nor a shiny new government program. People have been negotiating debt payments for generations. And it certainly doesn’t address core problems such as the government’s failure to prepare for such a pandemic or how so many American “have-nots” could suffer financial harm so quickly and so disastrously as the “haves” have prospered. But it is sage advice. As Mr. Franchot reports, a lot of bankers have told him they are ready to make arrangements. The first step is to reach out and ask them for help.